Mozambique: Credit reference interest rate drops for eighth time in November

Login

Register

http://www.clubofmozambique.com/

Mozambique: Credit reference interest rate drops for eighth time in November

5:03 CAT | 01 Nov 2024

Photo: Banco de Moçambique

The reference interest rate for credit in Mozambique will fall by another 0.7 percentage points, to 19.8% in November, the eighth monthly cut of 2024, the Mozambican Banking Association (AMB) announced this Friday.

Since 2018, the rate, known as the ‘prime rate’, has been falling, reaching a low of 15.5% in February 2021, when the trend reversed and the rate began to rise until reaching 24.1% in July 2023.

The rate returned to the values of April 2023 (23.5%) in January 2024, after six consecutive months at highs of 24.1%. It then fell to 23.1% in March, 22.7% in April, 22.3% in May, 22% in June and 21.2% in July, a value that remained the same in August and September, falling to 20.5% in October and 19.8% in November.

The fluctuations in the prime rate are associated with the monetary policy interest rate (MIMO rate, which influences the formula for calculating the prime rate) set by the central bank to control inflation.

At the end of September, the Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to lower the monetary policy interest rate from 14.25%, where it had sat since March, to 13.50%.

“This decision is supported by the continued consolidation of the outlook for maintaining single-digit inflation in the medium term, in a context in which the assessment of the risks and uncertainties associated with inflation projections remains favourable,” the Bank of Mozambique explained in a statement after the CPMO meeting, which takes place every two months.

The creation of the ‘prime rate’ was agreed in 2017 between the central bank and the AMB to eliminate the proliferation of reference rates in the cost of money. It was launched with a value of 27.75%.

The objective was for all credit operations to be based on a single rate, “plus a margin (‘spread’), which will be added or subtracted from the ‘prime rate’ based on the risk analysis” of each contract, the promoters explained.

Source: Lusa